The purchase, reported by Bloomberg on Monday, was covered widely by Nigerian media, with some asking why Dangote was using barrels from overseas, given the country is the largest producer in Africa and heavily dependent on petroleum for revenues. It’s important to note that Dangote has been tapping local supply too.

Here are some answers:

Price:

Burgeoning output in the US has helped to deepen the discount of US crude West Texas Intermediate Midland — at the point of export — in the global oil market.

That’s seen American gush out into the world, often undercutting supplies that are more local.

Normally, Nigerian barrels that are comparable quality to WTI trade at a premium to Brent.

This means that, even with the additional cost of hiring an oil tanker, it may still have been more profitable to purchase a US cargo on the open market than one from Nigeria.

Sourcing crude from outside of Nigeria has always been a possibility, according to Elitsa Georgieva, executive director at Citac, an energy consultancy specializing in the African downstream sector.

“However, given the proximity to local crude fields and the fiscal efficiencies of sourcing domestic crudes, there would need to be significant economic incentives to drive the processing of foreign crudes,” she said.

Supply and availability: 

Nigeria may be the continent’s biggest producer, but output has fallen as much as 50% over the past decade.

The OPEC member has been facing up to the gradual withdraw of majors from onshore and shallow water fields that have been taken over by local companies with fewer resources.

Crude theft and attacks on pipelines in the Niger Delta have also curbed production, particularly onshore, while a lot of what does get pumped is far offshore and often owned by foreign firms.

Much of Nigeria’s oil actually belongs to those international companies, or is supply that foreign firms have committed to purchase.

The result — a lack available-to-buy domestic barrels — may “necessitate” imports, according to Georgieva.

Crude Properties:

While Dangote imported US barrels, in reality they could be from anywhere and the company has made it clear in the past that it could import.

WTI Midland is rich in gasoline. On Saturday, Dangote told his cement distributors that gasoline production would begin at the end of March at the refinery.

Traders say that some grades from elsewhere were mentioned, but ultimately Dangote found WTI Midland to be best suited to its needs.

One trader of West African oil also pointed out that Dangote might be testing the US crude so that it is able to use the grade if necessary in future.

NNPC Deal:

NNPC, the national oil company, previously agreed to buy a 20% stake in the refinery and to pay for it with large amounts of crude. According to the company’s most recent financial statements, the company committed 335,000 barrels a day to acquire the stake.

Known supplies of Nigerian barrels in December and January were well below that flow rate, although those deliveries were still when the plant was in the earlier stages of ramping up, according to data from traders compiled by Bloomberg.

For the pact to remain in place, NNPC may need to step up its supplies to the refinery.

Dangote and NNPC declined to comment.